How’s Life? Measuring Well-Being

What well-being and sustainability measures are needed to go “Beyond GDP”?

On 12 October 2011, the OECD launched its new publication on well-being entitled How’s Life? Measuring Well-Being. How’s Life? is one of the main pillars of the OECD Better Life Initiative launched by the OECD Secretary-General for the Organisation’s 50th anniversary at its annual Forum in May 2011. This new initiative reaffirmed the OECD’s mission “Better Policies for Better Lives”.

How’s Life? talks about people’s life, aspirations and feelings in the 34 OECD countries and a few other key economies, such as India and China. The report sheds lights on whether higher income and wealth translate into better well-being. It is the first time that an OECD publication looks at the broad range of determinants of people’s sense of well-being that go beyond the purely economic aspects. How’s Life? defines well-being in terms of two domains (material living conditions and quality of life) and eleven dimensions (income and wealth, jobs and earnings, housing, health status, work and life balance, education and skills, social connections, civic engagement and governance, environment, personal security and subjective well-being).

How’s Life? shows that income and material resources matter for well-being and for one’s own sense of well-being, but other aspects of life matter even more. For instance, freedoms and opportunities to enjoy a good life are crucial to understanding whether people have the capacities to achieve goals that are important to them. However, many of the aspects of life that matter the most are not measured well enough to assess well-being entirely and in all its complexity. A good example is subjective indicators, which are crucial to understanding people’s well-being but need to be further improved, especially for the purpose of comparing countries.

As a basis, the report recognises that people are social creatures, and that others matter for one’s own well-being. This is indeed the first attempt by the OECD to measure the importance of friends, families, communities and trust in others. How’s Life? shows that social network support and volunteering increase life satisfaction to a considerable extent (see chart below).

Source: OECD’s calculations on the Gallup World Poll

In terms of overall well-being, the report finds that there is a great heterogeneity across OECD countries. No country is a top performer in all dimensions, but there are countries such as Australia, Canada and some Nordic countries that tend to do very well in many of the aspects of life considered.

In terms of changes over time, the report finds that average material living conditions have increased over the past fifteen years, although the financial crisis has halted some of these favourable trends. In addition, job insecurity has increased for some categories of workers and housing costs have become a major concern for many households in several OECD countries. As far as quality of life is concerned, great progress has been achieved in life expectancy and infant mortality, in educational attainments and in dangerous forms of air pollution. On the positive side, there have also been overall gains in leisure and reduction in hours worked. On the negative side, the level of civic engagement, as measured by voting turnout, has declined. This trend is also accompanied by low trust in public institutions, indicating a growing gap between how citizens and elites perceive the functioning of democratic systems.

In order to understand well-being, inequalities must also be considered. The report shows that low education and poverty are big barriers to having a good life. Well-being patterns by age and gender are in general more complex and are differentiated across domains. Overall there are great inequalities in all the dimensions of life considered, and the extent of inequalities varies across countries. There are however some countries where inequalities are consistently smaller (e.g. the Nordic countries) and this appears to be positively correlated with average well-being.

Although How’s Life? provides a quite comprehensive picture of well-being, there are still a lot of open questions that will be tackled in future editions of this publication. For instance, one of the great challenges is to better understand policy drivers of well-being outcomes so as to inform policies that can effectively contribute to enhancing people’s lives. There are also some aspects of well-being that deserve further analysis, such as economic insecurity and vulnerability and looking at how this affects people’s sense of well-being. Finally, while the first edition of How’s Life? mainly focuses on current well-being, a key future development is the consideration of sustainability aspects for four types of capital (economic, human, social and natural). The OECD is currently undertaking several research projects that will feed into the future editions of How’s Life? along these lines.

Quite a lot of work is also underway to further develop Your Better Life Index, the other major pillar of the OECD Better Life Initiative. The Index will be updated every year, displaying new features as well as larger country coverage. For 2012, the Index will include a gender breakdown, some new indicators and be available for Brazil and Russia.